Bidding wars for Toronto's housing market unlikely to slow down

From the sidewalk outside 831 Logan Avenue, there is not much to recommend the three-storey home that sold this week.

Yes, there is Withrow Park just across the street to the south, and vibrant Danforth Avenue is a short walk to the north.

But the shingles are crumbling, windows are broken, there is no real kitchen and in some areas the ceiling is falling in. It was, all who saw it agreed, in need of a $300,000+ renovation.

Those negatives did little to deter potential purchasers: 17 offers were made on the property, which sold for more than $1-million, well over the asking price of $699,000.

And presumably the 16 bidders who were unsuccessful have already turned their attention to other properties and other competing offers.
Indeed, with the scarcity of available housing in desirable neighbourhoods near the downtown core, it seems naive to assume that the days of the bidding war will ever come to an end.

“This is quite an interesting city we live in,” said Duncan Fremlin, a broker for Re/Max Hallmark Realty Ltd. “The great attraction is to walk to work or hop on your bike and walk across the valley and get to work that way, so it seems that the closer you are to Yonge Street, the greater the demand.”

Mr. Fremlin says that in his 24 years in the business he can only recall a brief six-month period following the economic downturn when demand in those neighbourhoods slowed down.

“The phones stopped ringing for maybe six months or so,” he said. “That was really the only serious blip that I remember in the last many years for real-estate.”

But with limited houses available in the most desirable neighbourhoods in Toronto, bidding wars are the new normal.

“It’s worth what someone is willing to pay for it, but ultimately if there’s no supply, we’re going to continue to see this,” said David Fleming, a sales representative for Bosley Real Estate Ltd. “Unless half of Riverdale is magically listed at the same time, we’re going to continue to see this, and I don’t think anyone blinks when they see 10 offers on a property.”

Part of what makes the properties in these neighbourhoods so valuable is the fact that there is no room for them to grow, explained Mr. Fleming.

“The reality is, if you want to take Leaside as an example, there’s only 4,000 homes in Leaside, there are never going to be 5,000 homes, it’s just never going to change,” he said. “So you can build condos anywhere in the city because you’ve got enough sky, but there’s only so much ground to work with.”

With so much competition in the Toronto housing market, Mr. Fleming explained that people tend to get emotionally tied to certain properties, which leads many to pay more than they can afford.

“If you have a couple with one kid and a baby on the way, and you’re looking at school districts, and your looking up the tree-lined streets, and it’s summer and it’s nice out and your carrying gelato while your walking down the street, that’s when people will pay significantly more than they ever intended,” he said.

“When you’ve got a couple that’s made offers on six different properties and lost, if they lost six times, that seventh time around they might say, ‘I’m tired of this….’ and they might end up paying $20,000 more than they ever intended on paying.”

Mr. Fleming feels for the families he has witnessed lose a house they had their eye on, having represented a family that lost a 17-way bidding war over a house in the Junction Triangle in May that was listed at $469,000, and eventually sold for $611,000.

While it’s easy to get attached to a particular house or neighborhood, Toronto Real Estate Board President Elect Richard Silver says it’s important for buyers to know their limit.

“I would just say know exactly how much it is your ready to pay, what it is you can afford, and whatever price you offer has to be one that you live with,” he said. “If you hear that it sold for more the next day than it should not be an offer that you’ve said, ‘oh, I would have paid that.”